Why A New Skyscraper In Saudi Arabia Could Mean Doom For The Global Economy

Mamta Badkar, provided by

Published 12:51 pm, Sunday, April 27, 2014

Saudi Arabia is expected to begin work on the Kingdom Tower next week.

The building in Jeddah is expected to cost $1.23 billion and stand 3,280 feet tall, according to the Saudi Gazette.

That's 568 feet taller than Dubai’s Burj Khalifa.

Construction is also underway on Sky City in China, projected to be 2,749 feet tall. Sky City is expected to finish before the Kingdom Tower and will, for a very brief period, hold the title of the world's tallest building.

Two years ago, Barclays introduced its Skyscraper Index, which suggests that construction booms, highlighted by record-breaking skyscrapers, coincide with the beginning of economic downturns.

In his 2012 report, Barclays' Andrew Lawrence and his team wrote that this is because "the world’s tallest buildings are simply the edifice of a broader skyscraper building boom, reflecting a widespread misallocation of capital and an impending economic correction."

But it isn't just the world's tallest building we should be looking at. Lawrence said it's also important to look at the number of skyscrapers being built and their geographic profile. This is because the tallest buildings "rarely stand alone."

With this in mind, investors should watch the building booms in China, India, and Saudi Arabia.

Here's a look at the Skyscraper Index from Barclays (click the image to enlarge it). Basically, what you see is a series of famous skyscrapers associated with subsequent busts. The most recent one is Dubai's Burg Khalifa. Another notable recent one is Malaysia's Petronas Towers, which presaged the Asian economic crisis of the late '90s.

Drawing on Barclays' Skyscraper Index, we pulled 10 skyscrapers whose constructions coincided with the financial crises of their times.

Equitable Life Building (1873)

The Long Depression, 1873–1878

The pervasive U.S. economic recession with bank failures that came to be known as the Long Depression coincided with the construction of the Equitable Life Building in New York City in 1873. At the time the building was the first skyscraper at a height of 142 feet.

Source: Barclays

Auditorium (1889) and New York World (1890)

British Banking Crisis, 1890

Chicago's 269-foot-tall Auditorium building, completed in 1889, and the 309-foot-tall New York World building, completed in 1890, coincided with the British banking crisis of 1890 and a world recession.

Source: Barclays

Masonic Temple, Manhattan Life Building, and Milwaukee City Hall (1893)

U.S. panic marked by the collapse of railroad overbuilding, 1893

Chicago's 302-foot-tall Masonic Temple, the 348-foot-tall Manhattan Life Building, and the 353-foot-tall Milwaukee City Hall coincided with the U.S. panic of 1893 marked by the collapse of railroad overbuilding. It also coincided with a string of bank failures and a run on gold.